What is Form CP261, and why is it important?
The IRS issues Form CP261 to business owners within 60 days of accepting the S Corp election (Form 2553).
This outlines the effective date that the IRS recognizes your S Corp. This is a critical document to have on hand for your business as it confirms you are operating in compliance with IRS regulations. This is then used in the following ways:
- Transitioning your bookkeeping to account for your tax entity change in the most accurate manner possible. S Corps require specific bookkeeping needs that are based on when your election was accepted
- Once your election is confirmed, Payroll is set up from that date onwards, as is required of S Corporations
- During your year end tax return preparation, this confirmed effective date is used to calculate your appropriate revenue for the business.
- If ever your 1120-S is rejected, or you are subject to an audit, CP261 is provided as supporting documentation to prove your compliance with regulatory requirements.
What if I don’t have CP261?
The IRS will only issue CP261 once. If you haven’t yet received this document, it could be due to the following reasons:
- If you have recently submitted your election request for the 2023 year, it can take the IRS up to 60 days to send confirmation to you
- Your election request may have been delayed, rejected by the IRS, or lost in transit
If any of the above apply to you, or if you have misplaced your copy, it may be helpful to request LTR385C instead. Form LTR385C can be used in place of CP261 to confirm your status as an S Corp.
How can I request LTR385C?
You can request LTR385C, by calling the IRS at 1-800-829-4933. As a note, you may experience higher than usual wait times given the time of the year. Once you're connected to an agent, you can request the form to be mailed or faxed to you.
- If you choose to have it mailed to you, please note this may take 2-3 weeks.
- If you choose to have it faxed to you, you will need an available fax number to provide to the IRS agent. This method is highly recommended as you will receive your letter within the same day.
Unfortunately, the IRS will not allow us to request this document on your behalf. Only you, as the owner of the S Corp, have the standing to contact the IRS about your election status.
Requesting the IRS to fax you CP261 or LTR385C
To begin, you'll need to have a working fax number. If you don't have one, consider signing up for an electronic fax service such as eFax or RingCentral. Once completed:
1. Call the IRS
2. Once connected to an agent, request a copy of the letter via fax.
3. The agent will confirm if you have a private and secure fax line. Confirm this is the case, and provide them with your fax number.
4. Thereafter, you should receive a copy of your form within the same day
What if I can’t get this document in time for the tax return deadline?
We understand that with the 1120-S deadline drawing closer, retrieving this documentation could take some time. Our priority is ensuring you have a smooth, comfortable tax return experience and we’re happy to help support you however we can. As a precaution, you can always request for Heard to help you file an extension.
Filing an extension request takes 10-15 minutes of your time, and overall the process will take no more than 2-3 business days – You can start this process in your Annual Tax Center starting March 4th.
As a gentle reminder, filing an extension does not put your business at risk of incurring penalties or increasing your chances of being audited by the IRS. This is a safe resource that can be used to ensure that you have the necessary time to file your tax return in the most efficient and accurate manner.